Accounting, business and technology insights for those who are blazing their own trail to success.

Hiring a Family Member: Pros, Cons and Everything in Between

So you've built a nice little business for yourself. Things are progressing nicely: revenue is climbing, expenses are proportional, margins are growing. Cash flow looks good month-to-month and your the balance sheet is healthy.

So far, you've been doing things on your own, but now you're thinking of hiring. More specifically, you're thinking of bringing a family member into the mix. Gasp! Before you do that, here's what you need to ponder...

It's Business, Not Personal—Right?

This maxim is absolutely true, but that doesn't make it a reality. Hiring is an incredibly difficult task in its own right and a pre-existing familial relationship is only going to make things more complicated. There's a history. There are emotions. There's pre-existing knowledge and context. Hiring a family member is going to be anything but just business, however that's not to say it's a bad idea. On the other side of the coin, hiring a family member could mean a heightened level of trust and respect. It could mean greater flexibility. Those same little nuances that might be considered negative by others may, in fact, be beneficial to you. What it all comes down to is planning, role definition and transparency. If you're committed to hiring a family member, do so with a written document that includes roles, responsibilities, compensation, review processes, etc. Then have all parties sign it. This way, when disputes or issues arise, you can refer to—and ultimately blame—the document.

Be Transparent

We briefly touched on this a second ago, but transparency is a wonderful policy as it relates to bringing on family members. (Actually, it's a great business policy, period.) When you decide to hire on a family member, start the on-boarding process with a quick company history and an overview of the current state of affairs—and we're not just talking anecdotally. Share the numbers. Discuss year-over-year growth and current projections. Talk about what went wrong in the past. When everything is on the up-and-up, there's no speculation or imaginative curiosities. That helps cull resentment and it also helps the employee feel more value and importance to the business.

Have a Plan Should Things Go South

Despite even the best efforts, hiring a family member can fail. That said, you need to have processes and metrics in place to determine employee success. You also need to have a plan for what happens if either party wants to bail. A standard employee contract, signed on the date of hire, is strongly recommended here. We suggest having a lawyer draft that up.

Consider Progressive Employment

Taking on a new full time employee can be a big strain for any small business. So if you know you need the help and you know your family member is the right person for the job, consider starting them off as a contractor. Then bring them along to part time... then full time. This can help ease the initial burden of hiring while also creating a "trail period" in which you both can gauge the engagement.

By no means is hiring a family member easy (or the right move), but it can be done. You just need to plan, forecast and be transparent. Basically, if you find yourself saying, "Oh, that'll never happen," account for it because it's undoubtedly happened before. And the last thing we want is family drama!